What is a DRO?

A DRO (Debt Relief Order) is one way for people with low income and few valuable assets to deal with their unsecured debts. It's a form of insolvency that can be a good alternative to bankruptcy for people who cannot afford the associated up-front fees, which can be up to £700.

Who is eligible for a DRO?

As DROs are designed to help people with few valuable assets, low income and relatively low debts, the requirements are very specific. You must meet all of these criteria to qualify:

• Your unsecured, unaffordable debts must not exceed £15,000.
• Your assets cannot be worth over £300, with the exception of a car that can be worth up to £1,000.
• Your income, after essential expenses such as bills and food, cannot exceed £50 per month.
• You must not have had a DRO in the past six years.
• You must have lived or conducted business in England, Northern Ireland or Wales in the past three years.
• You must not be involved in any other insolvency proceedings.

If you don't think you meet these criteria, click here to see other debt solutions.

What happens on a DRO?

You will pay an application fee of £90, which can be paid in instalments under certain circumstances. You will then be granted a twelve-month 'moratorium' on your debts.

This means that during these twelve months:

• You won't have to pay anything towards your debts.
• Any interest and charges will be frozen.
• You will be protected against legal action from your unsecured lenders.

After this time, your situation will be reassessed. If your finances have not improved sufficiently to allow you to repay your debts, your outstanding debts will be written off.

Are there any disadvantages?

One of the disadvantages of a DRO is the fact that your credit rating will be affected negatively for six years. It will also be recorded on the Insolvency Register while the Order is active - and for three months afterwards.

Even though there are some drawbacks, a DRO still may be your best route out of debt if you meet the criteria. It's important to note that the effects of not tackling your debts can be damaging to your credit rating as well.

If you'd like to know more about DROs, click here.

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Related resources

• Debt Relief Order (DRO) FAQs
• Debt Relief Order Pros and Cons
• What is the difference between a DRO and bankruptcy?
• IVA or DRO?
• How will a DRO (Debt Relief Order) affect my credit rating?
• How much debt do you need for a DRO?

Tags: DRO, debt relief order, insolvency, bankruptcy, debt, debt solution

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